Government Stimulus Doesn’t Stimulate

SchiffGold
Money Dollar SchiffGold | James Alexander Michie

It has been indicated that the government stimulus does not stimulate. And is that the United States government is spending money and accumulating debt at an unfathomable rate. US national debt increased by $ 814 billion in just two months. It should be noted that policymakers certainly do not care since they continue to increase spending and ask for even more.

On the other hand, it could be said that Democrats never cared about spending and Republicans swear that tax cuts will grow the economy and solve the debt problem.

Now it is clear that there is more evidence that the government stimulus does not stimulate. In fact, it has exactly the opposite effect, as can be seen in Europe’s spending binge.

Blunt evidence

Certainly, more and more evidence is being added that the stimulus of the government does not stimulate. In reference to this, economist Daniel Lasalle disaggregated the numbers in a recent article published by the Mises Institute.

Lasalle said exactly, “We have empirical evidence showing that massive government spending plans and tax hikes generate the opposite effect: weaker economic growth, higher debt and larger imbalances. The probability of attacking potential growth, worsening public accounts and breaching optimistic estimates is more than high”.

The analysis of empirical data in the last 15 years reveals that even if the so-called “fiscal multiplier” of public spending is positive, it is very poor. In fact, in most countries it is negative. This is especially true in nations that already have high levels of government debt. In other words, the stimulus of the government is actually slowing economic growth.

In fact, government spending in the United States is currently estimated at around 35.8% of GDP.

Also, Lasalle added, “More government spending will not spur growth in economies where the public sector already absorbs more than 40% of the GDP, and where the previous large stimulus plans have generated more debt and stagnation”.

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Source: SchiffGold

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